Sunday, June 6, 2021

China and stopping the upward pressure on copper

Governments do not like to be ruled by markets. Markets force prices higher or lower based on supply and demand and not the desires of policy-makers. There are overshoots and bubbles, but these are usually only determined after the fact and can be a matter of opinion. 

We have seen copper prices move off their highs coincident with discussions between Chinese companies and  policy-makers who want market prices to be kept in order. What this means is not exactly clear, but there have been issues of excess borrowing against copper stocks by Chinese firms. Additionally, softening in the Chinese economy has reduced pressure on copper after strong imports over the last year.

If global demand increases as the world economy reflates, it will determine price; not the desire of policy-makers. This current price reversal will only be temporary, and the longer-term trend will remain in place.

"The NDRC, China's top economic planner, along with the industry ministry, the state-owned assets regulator, the State Administration of Market Regulation, and the China Securities Regulatory Commission, reminded companies with market influence in sectors such as iron ore, steel, copper and aluminum at a Sunday meeting to run in accordance with laws and regulations and keep the market prices in order.

Industry associations such as the China Iron and Steel Association and the China Nonferrous Metals Industry Association also attended the meeting"  news on May 25th.  - Shine 


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